Schedule 14A Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Preliminary Additional Materials
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.149-11(c) or
Section 240.14a-12
High Income Advantage Trust III . . . . . . . . . . . . . . . . . . . . . . .
(Name of Registrant as Specified in its Charter)
Marilyn K. Cranney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
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14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(j)(3)
/ / Fee computed on table below per Exchange Act Rules
14a-6(j)(4) and 0-11.
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to Exchange Act Rule 0-11:
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HIGH INCOME ADVANTAGE TRUST III
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 15, 1994
The Annual Meeting of Shareholders of HIGH INCOME ADVANTAGE TRUST III (the
"Trust"), an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts, will be held in the Conference Center,
Forty-Fourth Floor, 2 World Trade Center, New York, New York 10048, on June 15,
1994, at 9:00 a.m., New York City time, for the following purposes:
1. To elect six (6) Trustees, four (4) to serve until the 1997 Annual
Meeting, one (1) to serve until the 1995 Annual Meeting and one (1) to serve
until the 1996 Annual Meeting, or, in each case, until their successors
shall have been elected and qualified;
2. To approve or disapprove continuance of the currently effective
Investment Management Agreement with Dean Witter InterCapital Inc.;
3. To ratify or reject the selection of Price Waterhouse as the Trust's
independent accountants for the fiscal year ending January 31, 1995; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Shareholders of record as of the close of business on April 14, 1994 are
entitled to notice of and to vote at the meeting. If you cannot be present in
person, your management would greatly appreciate your filling in, signing and
returning the enclosed proxy promptly in the envelope provided for that purpose.
In the event that the necessary quorum to transact business is not obtained
at the meeting, the persons named as proxies may propose one or more
adjournments of the meeting for a total of not more than 60 days in the
aggregate to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of the holders of a majority of the Trust's shares
present in person or by proxy at the meeting. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to vote
in favor of the proposal to approve continuance of the Investment Management
Agreement and will vote against any such adjournment those proxies required to
be voted against that proposal.
SHELDON CURTIS,
SECRETARY
April 21, 1994
New York, New York
IMPORTANT
YOU CAN HELP THE TRUST AVOID THE NECESSITY AND EXPENSE OF SENDING
FOLLOW-UP LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED
PROXY. IF YOU ARE UNABLE TO BE PRESENT IN PERSON, PLEASE FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY IN ORDER THAT THE NECESSARY QUORUM MAY BE
REPRESENTED AT THE MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
HIGH INCOME ADVANTAGE TRUST III
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 15, 1994
This statement is furnished in connection with the solicitation of proxies
by the Board of Trustees (the "Board") of HIGH INCOME ADVANTAGE TRUST III (the
"Trust"), for use at the Annual Meeting of Shareholders of the Trust to be held
on June 15, 1994 (the "Meeting"), and at any adjournments thereof.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Unmarked proxies will be voted for each of the nominees for election as Trustee
and in favor of Proposals 2 and 3 as set forth in the attached Notice of Annual
Meeting of Shareholders. A proxy may be revoked at any time prior to its
exercise by any of the following: written notice of revocation to the Secretary
of the Trust, execution and delivery of a later dated proxy to the Secretary of
the Trust, or attendance and voting at the Meeting.
Shareholders of record as of the close of business on April 14, 1994, the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting, are entitled to one vote for each share held and a
fractional vote for a fractional share. On April 14, 1994, there were
outstanding 12,876,779 shares of beneficial interest of the Trust, all with $.01
par value. No person known to own as much as 5% of the outstanding shares of the
Trust on that date. The Trustees and officers of the Trust, together, owned less
than 1% of the Trust's outstanding shares on that date. The percentage ownership
of shares of the Trust changes from time to time depending on purchases and
sales by shareholders and the total number of shares outstanding.
The cost of soliciting proxies for the Meeting, consisting principally of
printing and mailing expenses, will be borne by the Trust. The solicitation of
proxies will be by mail, which may be supplemented by solicitation by mail,
telephone or otherwise through Trustees and officers of the Trust and officers
and regular employees of Dean Witter InterCapital Inc. ("InterCapital" or the
"Investment Manager"), without special compensation therefor. The first mailing
of this proxy statement is expected to be made on or about April 21, 1994.
(1) ELECTION OF TRUSTEES
The number of Trustees has been fixed by the Trustees, pursuant to the
Trust's Declaration of Trust, at twelve. At the Meeting, six nominees are to be
elected to the Trust's Board of Trustees. There are presently twelve Trustees,
four of whom (Jack F. Bennett, Michael Bozic, Charles A. Fiumefreddo and John E.
Jeuck) are standing for election at this Meeting to serve until the 1997 Annual
Meeting, one of whom (John L. Schroeder) is standing for election at this
Meeting to serve until the 1995 Annual Meeting, and one of whom (Philip J.
Purcell) is standing for election at this Meeting to serve until the 1996 Annual
Meeting, in accordance with the Trust's Declaration of Trust, as amended.
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Nine of the current twelve Trustees (Jack F. Bennett, Michael Bozic, Edwin
J. Garn, John R. Haire, John E. Jeuck, Manuel H. Johnson, Paul Kolton, Michael
E. Nugent and John L. Schroeder) are "Independent Trustees", that is, Trustees
who are not "interested persons" of the Trust, as that term is defined in the
Investment Company Act of 1940, as amended (the "Act"). The nominees for
election as Trustees have been proposed by the Trustees now serving or, in the
case of the nominees for positions as Independent Trustees, by the Independent
Trustees now serving. Messrs. Bozic, Purcell and Schroeder were elected as
Trustees by the Trustees on April 8, 1994. All of the other Trustees have been
elected by the shareholders of the Trust.
The Board has two committees -- an Audit Committee and a Committee of the
Independent Trustees, consisting, in both cases, of the Independent Trustees.
Mr. Haire serves as the Chairman of both Committees. There are no nominating or
compensation committees of the Board.
The functions of the Audit Committee are: recommendation to the Trustees of
the engagement or discharge of the Trust's independent accountants; direction
and supervision of investigations into matters within the scope of the
independent accountants' duties, including the power to retain outside
specialists; review with the independent accountants of the audit plan and
results of the auditing engagement; approval of each professional service, audit
and non-audit, provided by the independent accountants and other accounting
firms prior to the performance of such service; review of the independence of
the independent accountants; consideration of the range of audit and non-audit
fees; review of the adequacy of the Trust's system of internal accounting
controls; advice to the independent accountants and personnel of management that
they have direct access to the Committee at all times; and preparation and
submission of Committee meeting minutes to the full Board.
The functions of the Committee of the Independent Trustees are:
recommendation to the full Board of approval of any management, advisory and/or
administration agreements; recommendations to the full Board of any underwriting
and/or distribution agreements; review of the fidelity bond and premium
allocation; review of errors and omissions, uncollectible items of deposit and
any other joint insurance policies and premium allocation; review of, and
monitoring of compliance with, procedures adopted pursuant to certain rules
promulgated under the Act; review of, and monitoring of compliance with,
guidelines and procedures for effecting principal transactions in certain
taxable money market instruments with Dean Witter Reynolds Inc. ("DWR"); and
such other duties as the Independent Trustees shall, from time to time, conclude
are necessary to carry out their duties under the Act.
The nominees of the Board of Trustees for election as Trustees are listed
below. It is the intention of the persons named in the enclosed form of Proxy to
vote the shares represented by them for the election of these nominees: Jack F.
Bennett, Michael Bozic, Charles A. Fiumefreddo, John E. Jeuck, Philip J. Purcell
and John L. Schroeder. Should any of the nominees become unable or unwilling to
accept nomination, or election, the persons named in the Proxy will exercise
their voting power in favor of such person or persons as the Board may
recommend. All of the nominees have consented to being named in this proxy
statement and to serve if elected. The Trust knows no reason why any of said
nominees would be unable or unwilling to accept nomination or election. Trustees
will be elected by a plurality of the votes cast at the meeting. Abstentions and
broker "non-votes" will have the same effect as a vote against the proposal.
Pursuant to the provisions of the Declaration of Trust, as amended, the
nominees for election as Trustees are divided into three separate classes, each
class having a term of three years. The term of office of one of each of the
three classes will expire each year.
The Board has determined that the nominees for election as Trustee shall be
standing for election as Trustee in each of the three classes of Trustee as
follows: Class I -- Messrs. Bennett, Bozic, Fiumefreddo and Jeuck;
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Class II -- Messrs. Johnson, Kolton, Schroeder and Telling; and Class III --
Messrs. Garn, Haire, Nugent and Purcell. Each nominee for Trustee at any Annual
Meeting will, if elected, serve a term of up to approximately three years
running for the period assigned to that class and terminating at the date of the
Annual Meeting of Shareholders so designated by the Board, or any adjournment
thereof. As a consequence of this method of election, the replacement of a
majority of the Board could be delayed for up to two years. As stated above, the
Trustees in Class I are standing for election at this Meeting and, if elected,
will serve until the 1997 Annual Meeting or until their successors shall have
been elected and qualified, one Trustee in Class II is standing for election at
this Meeting and, if elected, will serve until the 1995 Annual Meeting or until
his successor shall have been elected and qualified, and one Trustee in Class
III is standing for election at this Meeting and, if elected, will serve until
the 1996 Annual Meeting or until his successor shall have been elected and
qualified.
The following information regarding each of the nominees for election as
Trustee, and each of the members of the Board includes his principal occupations
and employment for at least the last five years, his age, shares of the Trust
owned, if any, as of April 14, 1994 (shown in parentheses), positions with the
Trust, and directorships or trusteeships in other companies which file periodic
reports with the Securities and Exchange Commission, including other investment
companies for which InterCapital serves as investment manager or investment
adviser, namely, InterCapital Income Securities Inc., InterCapital Insured
Municipal Bond Trust, InterCapital Quality Municipal Investment Trust,
InterCapital Insured Municipal Trust, InterCapital Quality Municipal Income
Trust, InterCapital Insured Municipal Income Trust, InterCapital California
Insured Municipal Income Trust, InterCapital Quality Municipal Securities,
InterCapital California Quality Municipal Securities, InterCapital New York
Quality Municipal Securities, InterCapital Insured Municipal Securities,
InterCapital Insured California Municipal Securities, Dean Witter High Yield
Securities Inc., Dean Witter Liquid Asset Fund Inc., Dean Witter Variable
Investment Series, Dean Witter Select Municipal Reinvestment Fund, Dean Witter
U.S. Government Money Market Trust, Dean Witter U.S. Government Securities
Trust, Dean Witter Tax-Exempt Securities Trust, Dean Witter Tax-Free Daily
Income Trust, Dean Witter American Value Fund, Dean Witter Convertible
Securities Trust, Dean Witter Dividend Growth Securities Inc., Dean Witter
Global Short-Term Income Fund Inc., Dean Witter Natural Resource Development
Securities Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Federal
Securities Trust, Dean Witter World Wide Investment Trust, Dean Witter
Developing Growth Securities Trust, Dean Witter California Tax-Free Income Fund,
Dean Witter New York Tax-Free Income Fund, Dean Witter Strategist Fund, Dean
Witter Managed Assets Trust, Dean Witter Value-Added Market Series, Dean Witter
Utilities Fund, Dean Witter California Tax-Free Daily Income Trust, High Income
Advantage Trust, High Income Advantage Trust II, Dean Witter World Wide Income
Trust, Dean Witter Intermediate Income Securities, Dean Witter European Growth
Fund Inc., Dean Witter Precious Metals and Minerals Trust, Dean Witter Capital
Growth Securities, Dean Witter New York Municipal Money Market Trust, Dean
Witter Multi-State Municipal Series Trust, Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Retirement Series, Dean Witter Health Sciences Trust, Active
Assets California Tax-Free Trust, Active Assets Money Trust, Active Assets
Tax-Free Trust, Active Assets Government Securities Trust, Dean Witter
Diversified Income Trust, Dean Witter Government Income Trust, Dean Witter
Premier Income Trust, Dean Witter Global Dividend Growth Securities, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter
Global Utilities Fund, Municipal Income Trust, Municipal Income Trust II,
Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal
Income Opportunities Trust II, Municipal Income Opportunities Trust III, Prime
Income Trust, Municipal Premium Income Trust (these investment companies,
together with the Trust, are referred to herein collectively as the "Dean Witter
Funds"), and investment companies for which InterCapital's wholly-owned
subsidiary, Dean Witter Services Company Inc. ("DWSC"), serves as manager and
TCW Funds Management, Inc.
4
serves as investment adviser, namely, TCW/DW Core Equity Trust, TCW/DW North
American Government Income Trust, TCW/DW Latin American Growth Fund, TCW/DW
Income and Growth Fund, TCW/DW
Balanced Fund, TCW/DW Small Cap Growth Fund, TCW/DW North American Intermediate
Income Trust, TCW/DW Emerging Markets Opportunities Trust, TCW/DW Term Trust
2000, TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds").
The nominees for Trustee to be elected at this Meeting are:
JACK F. BENNETT, Trustee since December, 1988, age 70; retired; Director or
Trustee of the Dean Witter Funds; formerly Senior Vice President and Director of
Exxon Corporation (1975-1989) and Under Secretary of the U.S. Treasury for
Monetary Affairs (1974-1975); Director of Phillips Electronics N.V., Tandem
Computers Inc. and Massachusetts Mutual Insurance Company; Director or Trustee
of various not-for-profit and business organizations.
MICHAEL BOZIC, Trustee since April, 1994; age 53; President and Chief
Executive Officer of Hills Department Stores (since May, 1991); formerly
Chairman and Chief Executive Officer (January, 1987-August, 1990) and President
and Chief Operating Officer (August, 1990-February, 1991) of the Sears
Merchandise Group of Sears, Roebuck and Co. ("Sears"); Director or Trustee of
the Dean Witter Funds; Director of Harley Davidson Credit Inc., the United Negro
College Fund and Domain Inc. (home decor retailer).
CHARLES A. FIUMEFREDDO,* Trustee since July, 1991; age 60; Chairman, Chief
Executive Officer and Director of InterCapital, DWSC and Dean Witter
Distributors Inc. ("Distributors"); Executive Vice President and Director of
Dean Witter Reynolds Inc. ("DWR"); Chairman, Director or Trustee, President and
Chief Executive Officer of the Dean Witter Funds; Chairman, Chief Executive
Officer and Trustee of the TCW/DW Funds; Chairman and Director of Dean Witter
Trust Company ("DWTC"); Director and/or officer of various Dean Witter, Discover
& Co. ("DWDC") subsidiaries; formerly Executive Vice President and Director of
DWDC (until February, 1993).
DR. JOHN E. JEUCK, Trustee since December, 1988; age 77; retired; Director
or Trustee of the Dean Witter Funds; formerly Robert Law Professor of Business
Administration, Graduate School of Business, University of Chicago (until July,
1989); Business consultant.
PHILIP J. PURCELL,* Trustee since April, 1994; age 50; Chairman of the Board
of Directors and Chief Executive Officer of DWDC, DWR and Novus Credit Services
Inc.; Director of InterCapital, DWSC and Distributors; Director or Trustee of
the Dean Witter Funds; Director and/or officer of various DWDC subsidiaries.
JOHN L. SCHROEDER, Trustee since April, 1994; age 63; Executive Vice
President and Chief Investment Officer of The Home Insurance Company (since
August, 1991); Director or Trustee of the Dean Witter Funds; Director of
Citizens Utilities Company; formerly Chairman and Chief Investment Officer of
Axe-Houghton Management and the Axe-Houghton Funds (April, 1983-June, 1991) and
President of USF&G Financial Services, Inc. (June, 1990-June, 1991.)
The Trustees who are not standing for reelection at this Meeting are:
EDWIN JACOB (JAKE) GARN, Trustee since January, 1993; age 61; Director or
Trustee of the Dean Witter Funds; formerly United States Senator (R-Utah)
(1974-1992) and Chairman, Senate Banking Committee (1980-1986); formerly Mayor
of Salt Lake City, Utah (1971-1974); formerly Astronaut, Space Shuttle Discovery
(April 12-19, 1985); Vice Chairman, Huntsman Chemical Corporation (since
January, 1993); Member of the board of various civic and charitable
organizations.
JOHN R. HAIRE, Trustee since December, 1988; age 69; Chairman of the Audit
Committee and Chairman of the Committee of the Independent Directors or Trustees
and Director or Trustee of the Dean Witter Funds;
5
Trustee of the TCW/DW Funds; formerly President, Council for Aid to Education
(1978-October, 1989) and Chairman and Chief Executive Officer of Anchor
Corporation, an investment adviser (1964-1978); Director of Washington National
Corporation (insurance) and Bowne & Co., Inc. (printing).
DR. MANUEL H. JOHNSON, Trustee since July, 1991; age 45; Senior Partner,
Johnson Smick International, Inc., a consulting firm; Koch Professor of
International Economics and Director of the Center for Global Market Studies at
George Mason University (since September, 1990); Co-Chairman and a founder of
the Group of Seven Council (G7C), an international economic commission (since
September, 1990); Director or Trustee of the Dean Witter Funds; Trustee of the
TCW/DW Funds; Director of Greenwich Capital Markets Inc. (broker-dealer);
formerly Vice Chairman of the Board of Governors of the Federal Reserve System
(February, 1986-August, 1990) and Assistant Secretary of the U.S. Treasury
(1982-1986).
PAUL KOLTON, Trustee since December, 1988; age 70; Director or Trustee of
the Dean Witter Funds; Chairman of the Audit Committee and Chairman of the
Committee of the Independent Trustees and Trustee of the TCW/DW Funds; formerly
Chairman of Financial Accounting Standards Advisory Council; formerly Chairman
and Chief Executive Officer of the American Stock Exchange; Director of UCC
Investors Holding Inc. (Uniroyal Chemical Company, Inc.); Director or Trustee of
various not-for-profit organizations.
MICHAEL E. NUGENT, Trustee since July, 1991; age 58; General Partner,
Triumph Capital, L.P., a private investment partnership (since April, 1988);
Director or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
formerly Vice President, Bankers Trust Company and BT Capital Corporation
(September, 1984-March, 1988); Director of various business organizations.
EDWARD R. TELLING,* Trustee since December, 1988; age 75; retired; Director
or Trustee of the Dean Witter Funds; formerly Chairman of the Board of Directors
and Chief Executive Officer (1978-1985) and President (January, 1981-March, 1982
and February, 1984-August, 1984) of Sears; formerly Director of Sears.
The executive officers of the Trust other than shown above are: Sheldon
Curtis, Vice President, Secretary and General Counsel; David A. Hughey, Vice
President; Robert M. Scanlan, Vice President; Edmund C. Puckhaber, Vice
President; Peter M. Avelar, Vice President; and Thomas F. Caloia, Treasurer. In
addition, Jonathan R. Page and James F. Willison serve as Vice Presidents and
Marilyn K. Cranney, Barry Fink, Lawrence S. Lafer, Lou Anne D. McInnis and Ruth
Rossi serve as Assistant Secretaries. Mr. Curtis is 62 years old and is
currently Senior Vice President and General Counsel of InterCapital and DWSC and
Assistant Secretary of DWR and DWDC; he is also Senior Vice President, Assistant
Secretary and Assistant General Counsel of Distributors and Senior Vice
President and Secretary of DWTC. Mr. Scanlan is 58 years old and is currently
President and Chief Operating Officer of InterCapital (since March, 1993) and
DWSC; he is also Executive Vice President of Distributors and Executive Vice
President and Director of DWTC. He was previously Executive Vice President of
InterCapital (November, 1990-March, 1993) and prior thereto was Chairman of
Harborview Group Inc. Mr. Hughey is 62 years old and is currently Executive Vice
President and Chief Administrative Officer of InterCapital and DWSC; he is also
Executive Vice President and Chief Administrative Officer of Distributors and
DWTC as well as a Director of DWTC. He was previously President of DWTC
(October, 1989-March, 1993). Mr. Puckhaber is 54 years old and is currently
Executive Vice President of InterCapital (since January, 1991). Mr. Avelar is 34
years old and is currently Senior Vice President of InterCapital. He was
previously employed by PaineWebber Asset Management as a
- ------------------------
* Messrs. Fiumefreddo, Purcell and Telling may be deemed "interested persons,"
as defined in Section 2(a)(19) of the Act, of the Trust and its Investment
Manager, due to their affiliation with the Investment Manager and/or its
affiliated companies.
6
senior portfolio manager (March, 1989-December 1990). Mr. Caloia is 47 years old
and is currently First Vice President of InterCapital and DWSC. Mr. Page is 47
years old and is currently Senior Vice President of InterCapital. Mr. Willison
is 50 years old and is currently Senior Vice President of InterCapital. Other
than Messrs. Scanlan and Avelar, each of the above officers has been an employee
of InterCapital or DWR (formerly the corporate parent of InterCapital) for over
five years.
Messrs. Fiumefreddo, Purcell and Telling, Trustees of the Trust, and
officers of the Trust own securities of DWDC which, in the aggregate, constitute
less than 1% of the securities of each class outstanding.
Each of the Independent Trustees is paid by the Trust an annual retainer fee
of $1,200 plus $50 for each meeting of the Board, the Audit Committee or the
Committee of the Independent Trustees attended by the Trustee in person (the
Trust pays the Chairman of the Audit Committee an additional annual fee of
$1,000 and pays the Chairman of the Committee of the Independent Trustees an
additional annual fee of $2,400, in each case inclusive of the Committee meeting
fees), together with any out-of-pocket expenses incurred by them in connection
with attendance at any such meetings. The Trust pays no remuneration to any
Trustee who is not an Independent Trustee or to any of the Trust's officers. For
the fiscal year ended January 31, 1994, the Trust accrued a total of $21,536 for
Trustees' fees and expenses. During the fiscal year ended January 31, 1994, the
Board held six meetings, and the Audit Committee and the Committee of the
Independent Trustees, which are presently comprised of the nine Independent
Trustees, held three meetings and eleven meetings, respectively. No Independent
Trustee attended fewer than 75% of the meetings of the Board of Trustees, the
Audit Committee and the Committee of the Independent Trustees held while he
served in such positions.
(2) APPROVAL OR DISAPPROVAL OF CURRENTLY EFFECTIVE
INVESTMENT MANAGEMENT AGREEMENT
The Trust's investments are managed by Dean Witter InterCapital Inc.
(referred to herein as the "Investment Manager" or "InterCapital"), pursuant to
an Investment Management Agreement dated June 30, 1993 (referred to herein as
the "Management Agreement") which took effect upon the distribution by Sears to
its shareholders of all the common shares of DWDC (the parent company of
InterCapital) then owned by Sears.
The Management Agreement was initially approved by the Board of Trustees on
October 30, 1992, and by the shareholders of the Trust at a Special Meeting of
Shareholders held on January 13, 1993. The present Management Agreement
supersedes an earlier management agreement originally entered into by the Trust
with DWR, through its InterCapital Division, and initially approved by the
Board, including a majority of the Independent Trustees, on December 7, 1988 and
last approved by the shareholders of the Trust at their Annual Meeting of
Shareholders held on June 25, 1992. In an internal reorganization which took
place in January, 1993, InterCapital assumed the investment management
activities previously performed by the InterCapital Division of DWR. The
assumption by InterCapital of DWR's rights and obligations under this earlier
management agreement in connection with the reorganization was approved by the
Trustees at a meeting held on October 30, 1992. The terms of the Management
Agreement, including fees payable by the Trust thereunder, are substantially
identical in all respects to those of the earlier management agreement except
for the dates of effectiveness and expiration and the name of the Investment
Manager. The terms of the Management Agreement are described below. The
Management Agreement's continuation until April 30, 1995 was approved by the
Trustees, including a majority of the Independent Trustees, at a meeting of the
Board held on April 8, 1994. In the event shareholders do not approve
continuance of the Management Agreement by the required majority vote at the
forthcoming meeting or any adjournment thereof, the Board of Trustees of the
Trust will take such action as it deems to be in the best interests
7
of the Trust and its shareholders, which may include calling a special meeting
of shareholders to vote on a new investment management agreement.
In considering whether or not to approve the Management Agreement, the Board
of Trustees reviewed the terms of the agreement and considered all materials and
information deemed relevant to its determination. Among other things, the Board
considered the nature and scope of services to be rendered, the quality of the
Investment Manager's services and personnel, and the appropriateness of the fees
that are paid under the Management Agreement. Based upon its review, the Board
of Trustees, including all of the Independent Trustees, determined that the
approval of the Management Agreement was in the best interests of the Trust and
its shareholders.
The favorable vote of a majority of the outstanding voting securities of the
Trust is required for the approval of the Management Agreement. Such a majority
is defined in the Act as the lesser of: (a) 67% or more of the shares present at
the Meeting, if the holders of more than 50% of the outstanding shares of the
Trust are present or represented by proxy, or (b) more than 50% of the
outstanding shares. Abstentions and broker "non-votes" will have the same effect
as a vote against the proposal.
THE INDEPENDENT TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS APPROVE
THE MANAGEMENT AGREEMENT.
THE MANAGEMENT AGREEMENT
The Management Agreement provides that the Investment Manager shall obtain
and evaluate such information and advice relating to the economy, securities and
commodity markets and securities and commodities as it deems necessary or useful
to discharge its duties under the Management Agreement, and that it shall
continuously supervise the management of the assets of the Trust in a manner
consistent with the investment objectives and policies of the Trust and subject
to such other limitations and directions as the Board may, from time to time,
prescribe.
The Management Agreement provides that the Investment Manager shall
continuously manage the assets of the Trust in a manner consistent with the
Trust's investment objectives. The Investment Manager has authority to place
orders for the purchase and sale of portfolio securities on behalf of the Trust
without prior approval of its Trustees. The Trustees review the investment
portfolio at their regular meetings. In addition, the Investment Manager pays
the compensation of the officers of the Trust and provides the Trust with office
space and equipment and such clerical help and bookkeeping services and
telephone service, heat, light, power and other utilities. The Investment
Manager also pays for the services of personnel in connection with the pricing
of the Trust's shares and the preparation of prospectuses, proxy statements and
reports required to be filed with the Federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). In return for its investment services and the expenses which the
Investment Manager assumes under the Management Agreement, the Trust pays the
Investment Manager compensation which is computed weekly and payable monthly and
which is determined by applying the following annual rates to the Trust's weekly
net assets: 0.75% of the portion of the average weekly net assets not exceeding
$250 million; 0.60% of the portion of average weekly net assets exceeding $250
million and not exceeding $500 million; 0.50% of the portion of average weekly
net assets exceeding $500 million and not exceeding $750 million; 0.40% of the
portion of average weekly net assets exceeding $750 million and not exceeding $1
billion; and 0.30% of the portion of average weekly net assets exceeding $1
billion. This fee is higher than that paid by most other investment companies.
Pursuant to the Management Agreement, the Trust accrued
8
to the Investment Manager total compensation of $687,426 during the fiscal year
ended January 31, 1994. The net assets of the Trust totalled $97,465,754 at
January 31, 1994.
Under the Management Agreement, the Trust is obligated to bear all of the
costs and expenses of its operation, except those specifically assumed by the
Investment Manager, including, without limitation: charges and expenses of any
registrar, custodian or depository appointed by the Trust for the safekeeping of
its cash, portfolio securities or commodities and other property, and any stock
transfer or dividend agent or agents appointed by the Trust; brokers'
commissions chargeable to the Trust in connection with portfolio securities
transactions to which the Trust is a party; all taxes, including securities or
commodities issuance and transfer taxes, and fees payable by the Trust to
Federal, state or other governmental agencies; costs and expenses of engraving
or printing certificates representing shares of the Trust; all costs and
expenses in connection with registration and maintenance of registration of the
Trust and of its shares with the Securities and Exchange Commission and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of counsel) and the costs and expense of preparing, printing
(including typesetting) and distributing prospectuses for such purposes; all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
mailing proxy statements and reports to shareholders; fees and travel expenses
of Trustees or members of any advisory board or committee who are not employees
of the Investment Manager or any corporate affiliate of the Investment Manager;
all expenses incident to the payment of any dividend or distribution program;
charges and expenses of any outside pricing services; charges and expenses of
legal counsel, including counsel to the Independent Trustees of the Trust, and
independent accountants in connection with any matter relating to the Trust (not
including compensation or expenses of attorneys employed by the Investment
Manager); membership dues of industry associations; interest payable on Trust
borrowings; fees and expenses incident to the listing of the Trust's shares on
any stock exchange; postage; insurance premiums on property or personnel
(including officers and Trustees) of the Trust which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims,
liabilities, litigation costs and any indemnification related thereto); and all
other charges and costs of the Trust's operations unless otherwise explicitly
provided in the Management Agreement.
The Management Agreement provides that it shall continue in effect until
April 30, 1994 and that, after the initial period of effectiveness, it will
continue in effect from year to year thereafter provided such continuance is
approved at least annually by vote of a majority, as defined in the Act, of the
outstanding voting securities of the Trust or by the Trustees of the Trust, and,
in either event, by the vote cast in person by a majority of the Trustees who
are not parties to the Management Agreement or "interested persons" of any such
party (as defined in the Act) at a meeting called for the purpose of voting on
such approval. The Management Agreement's continuation until April 30, 1995 was
approved by the Trustees, including a majority of the Independent Trustees, at a
Meeting of the Trustees held on April 8, 1994, called for the purpose of
approving the Management Agreement
The Management Agreement also provides that it may be terminated at a any
time by the Investment Manager, the Trustees of the Trust or by a vote of a
majority of the outstanding voting securities of the Trust, in each instance
without the payment of any penalty, on thirty days' notice and will
automatically terminate upon any assignment.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and its wholly-owned subsidiary, DWSC, DWSC began to provide the
administrative services to the Trust which were previously performed directly by
InterCapital. The foregoing internal reorganization did not result in any change
in the nature or scope of the administrative services being provided to the
Trust or any of the fees being paid by the Trust for the overall services being
performed under the terms of the Management Agreement.
9
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. is the Trust's investment manager.
InterCapital maintains its offices at Two World Trade Center, New York, New York
10048. InterCapital, which was incorporated in July, 1992, is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a balanced financial
services organization providing a broad range of nationally marketed credit and
investment products. As noted above, in an internal reorganization which took
place in January, 1993, InterCapital assumed the investment advisory, management
and administrative activities previously performed by the InterCapital Division
of DWR.
The Principal Executive Officer and Directors of InterCapital, and their
principal occupations, are:
Philip J. Purcell, Chairman of the Board of Directors and Chief Executive
Officer of DWDC and DWR and Director of InterCapital, DWSC and Distributors;
Richard M. DeMartini, President, Chief Operating Officer of Dean Witter Capital
and Director of DWR, Distributors, InterCapital and DWSC; James F. Higgins,
President, Chief Operating Officer of Dean Witter Financial and Director of DWR,
Distributors, InterCapital and DWSC; Charles A. Fiumefreddo, Executive Vice
President and Director of DWR and Chairman of the Board of Directors and Chief
Executive Officer of InterCapital, DWSC and Distributors; Christine A. Edwards,
Executive Vice President, Secretary, General Counsel and Director of DWR and
Distributors, and Director of InterCapital and DWSC; and Thomas C. Schneider,
Executive Vice President, Chief Financial Officer and Director of DWR,
Distributors, InterCapital and DWSC.
The business address of the foregoing Directors and Executive Officers is
Two World Trade Center, New York, New York 10048.
InterCapital and its wholly-owned subsidiary, DWSC, serve in various
investment management, advisory, management and administrative capacities to
investment companies and pension plans and other institutional and individual
investors. The Appendix lists the investment companies for which InterCapital
provides investment management or investment advisory services and sets forth
the net assets of and the fees payable by such companies.
DWDC has its offices at Two World Trade Center, New York, New York 10048.
There are various lawsuits pending against DWDC involving material amounts
which, in the opinion of its management, will be resolved with no material
effect on the consolidated financial position of the company.
During the fiscal year ended January 31, 1994, the Trust accrued to Dean
Witter Trust Company, the Trust's Transfer Agent and an affiliate of the
Investment Manager, transfer agency fees of $53,615.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the general supervision of the Board, the Investment Manager is
responsible for decisions to buy and sell securities for the Trust and arranges
for the execution of portfolio securities transactions on behalf of the Trust.
Purchases of portfolio securities are made from dealers, underwriters and
issuers; sales, if any, prior to maturity, are made to dealers and issuers. The
Trust does not normally incur any brokerage commission expense on such
transactions. In accordance with its investment policies, the Trust's principal
investments are in debt securities which are generally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. Securities purchased in underwritten offerings include a fixed amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. When securities are purchased or sold directly from or
to an issuer, no commissions or discounts are paid. Options and futures
transactions will usually be effected through
10
a broker and a commission will be charged. On occasion, the Trust may also
purchase certain money market instruments directly from an issuer, in which case
no commissions or discounts are paid.
The policy of the Trust regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable price and efficient execution of transactions. In seeking to implement
the Trust's policy, the Investment Manager will effect transactions with those
dealers who the Investment Manager believes provide the most favorable prices
and are capable of providing efficient executions. If the Investment Manager
believes such price and execution can be obtained from more than one dealer, it
may give consideration to placing portfolio transactions with those dealers who
also furnish research and other services to the Trust or the Investment Manager.
Such services may include, but are not limited to, any one or more of the
following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investments;
wire services; and appraisals or evaluations of portfolio securities. In
transactions effected with a dealer, acting as principal, who furnishes research
services to the Trust, the Trust will not purchase securities at a higher price,
or sell securities at a lower price, than would be the case if the dealer had
not furnished such services.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some or all of its other clients and may not in all cases benefit
the Trust directly. While such services are useful and important in
supplementing its own research and facilities, the Investment Manager believes
the value of such services is not determinable and does not significantly reduce
its expenses. The Trust does not reduce the management fee it pays to the
Investment Manager by any amount that may be attributable to the value of such
services. During the fiscal year ended January 31, 1994, the Trust paid no
brokerage commissions and the portfolio turnover rate of the Trust was 231%.
Pursuant to an Order of the Securities and Exchange Commission, the Trust
may effect principal transactions in certain money market instruments with DWR.
The Trust will limit its transactions with DWR to U.S. Government and Government
Agency Securities, bank money instruments (i.e., certificates of deposit and
banker's acceptances) and commercial paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
Consistent with the policies described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. In order for DWR to effect any portfolio transactions for
the Trust, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Board, including a
majority of the Independent Trustees, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to DWR are consistent with the foregoing standard. During the fiscal year
ended January 31, 1994, the Trust paid no brokerage commissions to DWR.
(3) RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Trustees have unanimously selected the firm of Price Waterhouse as the
Trust's independent accountants for the fiscal year ending January 31, 1995.
Price Waterhouse has been the independent accountants for the Trust since its
inception, and has no direct or indirect financial interest in the Trust.
11
A representative of Price Waterhouse is expected to be present at the Annual
Meeting of Shareholders and will be available to make a statement, if he or she
so desires, and to respond to appropriate questions of shareholders.
The affirmative vote of the holders of a majority of the shares represented
and entitled to vote at the Annual Meeting is required for ratification of the
selection of Price Waterhouse as the independent accountants for the Trust.
Abstentions and broker "non-votes" will have the same effect as a vote against
the proposal.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS RATIFY THE
SELECTION OF PRICE WATERHOUSE AS THE INDEPENDENT ACCOUNTANTS FOR THE TRUST.
ADDITIONAL INFORMATION
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the Meeting, the
persons named as proxies may propose one or more adjournments of the Meeting for
a total of not more than 60 days in the aggregate to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of the
holders of a majority of the Trust's shares present in person or by proxy at the
Meeting. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of Proposal Two and will
vote against any such adjournment those proxies required to be voted against
that proposal.
SHAREHOLDERS PROPOSALS
Proposals of security holders intended to be presented at the next Annual
Meeting of Shareholders must be received no later than February 23, 1995 for
inclusion in the proxy statement for that meeting.
OTHER BUSINESS
The management knows of no other matters which may be presented at the
Meeting. However, if any matters not now known properly come before the Meeting,
it is the intention of the persons named in the enclosed form of proxy or their
substitutes, to vote all shares that they are entitled to vote on any such
matter, utilizing such proxy in accordance with their best judgment on such
matters.
FINANCIAL STATEMENTS OF THE INVESTMENT MANAGER
The balance sheet of InterCapital, annexed hereto as an Exhibit, is required
by Rule 20a-2 under the Act. THIS IS NOT A FINANCIAL STATEMENT OF THE TRUST. The
Trust's financial statements are set forth in its Annual Report for the fiscal
year ended January 31, 1994, copies of which were previously sent to
shareholders.
By Order of the Board of Trustees
SHELDON CURTIS
SECRETARY
12
APPENDIX
InterCapital serves as investment manager or investment adviser to the
following investment companies, with the net assets shown as of April 14, 1994:
(1) Dean Witter High Yield Securities Inc., with assets of approximately
$551 million, for an investment management fee at an annual rate of 0.50% on
assets up to $500 million, scaled down at various asset levels to 0.30% on
assets over $3 billion; (2) Dean Witter Liquid Asset Fund Inc., with assets of
approximately $8.8 billion, for an investment management fee at an annual rate
of 0.50% on assets up to $500 million, scaled down at various asset levels to
0.248% on assets over $17.5 billion; (3) Dean Witter Tax-Exempt Securities
Trust, with assets of approximately $1.5 billion, for an investment management
fee at an annual rate of 0.50% on assets up to $500 million, scaled down at
various assets levels to 0.325% on assets over $1.25 billion; (4) Dean Witter
Tax-Free Daily Income Trust, with assets of approximately $638 million, for an
investment management fee at an annual rate of 0.50% on assets up to $500
million, scaled down at various asset levels to 0.25% on assets over $3 billion;
(5) Dean Witter American Value Fund, with assets of approximately $1.4 billion,
for an investment management fee at an annual rate of 0.625% on assets up to
$250 million and 0.50% on assets over $250 million; (6) Dean Witter Dividend
Growth Securities Inc., with assets of approximately $6.5 billion, for an
investment management fee at an annual rate of 0.625% on assets up to $250
million, scaled down at various asset levels to 0.325% on assets over $8
billion; (7) Dean Witter Variable Investment Series, with assets of
approximately $2.5 billion, for an investment management fee at an annual rate
of 1.0% (of which 40% is paid to a Sub-Adviser) of the net assets of each of the
European Growth Portfolio and the Pacific Growth Portfolio, 0.75% of the net
assets of the Global Dividend Growth Portfolio, 0.65% of the net assets of the
Capital Growth Portfolio, 0.65% of the net assets of the Utilities Portfolio up
to $500 million and 0.55% of the net assets of the Portfolio over $500 million,
0.625% of the net assets of the Dividend Growth Portfolio up to $500 million and
0.50% of the net assets of the Portfolio over $500 million, and 0.50% of the net
assets of each of the other five Portfolios; (8) Dean Witter Select Municipal
Reinvestment Fund, with assets of approximately $92 million, for an investment
management fee at an annual rate of 0.50%; (9) Active Assets Money Trust, with
assets of approximately $4.2 billion, for an investment management fee at an
annual rate of 0.50% on assets up to $500 million, scaled down at various asset
levels to 0.25% on assets over $3 billion; (10) Active Assets Tax-Free Trust,
with assets of approximately $1.5 billion, for an investment management fee at
an annual rate of 0.50% on assets up to $500 million, scaled down at various
asset levels to 0.25% on assets over $3 billion; (11) Active Assets California
Tax-Free Trust, with assets of approximately $296 million, for an investment
management fee of 0.50% on assets up to $500 million, scaled down at various
levels to 0.25% on assets over $3 billion; (12) Active Assets Government
Securities Trust, with assets of approximately $532 million, for an investment
management fee at an annual rate of 0.50% on assets up to $500 million, scaled
down at various asset levels to 0.25% on assets over $3 billion; (13) Dean
Witter Natural Resource Development Securities Inc., with assets of
approximately $136 million, for an investment management fee at an annual rate
of 0.625% on assets up to $250 million and 0.50% on assets over $250 million;
(14) Dean Witter U.S. Government Money Market Trust, with assets of
approximately $808 million, for an investment management fee at an annual rate
of 0.50% on assets up to $500 million, scaled down at various asset levels to
0.25% on assets over $3 billion; (15) Dean Witter Developing Growth Securities
Trust, with assets of approximately $310 million, for an investment management
fee at an annual rate of 0.50% on assets up to $500 million and 0.475% on assets
over $500 million; (16) Dean Witter U.S. Government Securities Trust, with
assets of approximately $11 billion, for an investment management fee at an
annual rate of 0.50% on assets up to $1 billion, scaled down at various asset
levels to 0.30% on assets over $12.5 billion; (17) Dean Witter California
Tax-Free Income Fund, with assets of approximately $1.1 billion, for an
investment management fee at an annual rate of 0.55% on assets up to $500
million, scaled down at various asset
I-1
levels to 0.475% on assets over $1 billion; (18) Dean Witter New York Tax-Free
Income Fund, with assets of approximately $229 million, for an investment
management fee at an annual rate of 0.55% on assets up to $500 million and
0.525% on assets over $500 million; (19) Dean Witter Convertible Securities
Trust, with assets of approximately $199 million, for an investment management
fee at an annual rate of 0.60% on assets up to $750 million, scaled down at
various asset levels to 0.425% on assets over $3 billion; (20) Dean Witter
Federal Securities Trust, with assets of approximately $969 million, for an
investment management fee at an annual rate of 0.55% on assets up to $1 billion,
scaled down at various asset levels to 0.35% on assets over $12.5 billion; (21)
InterCapital Income Securities Inc., with assets of approximately $216 million,
for an investment management fee at an annual rate of 0.50%; (22) Dean Witter
Value-Added Market Series, with assets of approximately $345 million, for an
investment management fee at an annual rate of 0.50% on assets up to $500
million and 0.45% on assets over $500 million; (23) Dean Witter Utilities Fund,
with assets of approximately $3.4 billion, for an investment management fee at
an annual rate of 0.65% on assets up to $500 million, scaled down at various
asset levels to 0.425% on assets over $5 billion; (24) Dean Witter California
Tax-Free Daily Income Trust, with assets of approximately $275 million, for an
investment management fee at an annual rate of 0.50% on assets up to $500
million, scaled down at various asset levels to 0.25% on assets over $3 billion;
(25) Dean Witter Managed Assets Trust, with assets of approximately $267
million, for an investment management fee at an annual rate of 0.60% on assets
up to $500 million and 0.55% on assets over $500 million; (26) High Income
Advantage Trust, with assets of approximately $181 million, for an investment
management fee at an annual rate of 0.75% on assets up to $250 million, scaled
down at various asset levels to 0.30% on assets over $1 billion; (27) High
Income Advantage Trust II, with assets of approximately $241 million, for an
investment management fee at an annual rate of 0.75% on assets up to $250
million, scaled down at various asset levels to 0.30% on assets over $1 billion;
(28) High Income Advantage Trust III, with assets of approximately $93 million,
for an investment management fee at an annual rate of 0.75% on assets up to $250
million, scaled down at various asset levels to 0.30% on assets over $1 billion;
(29) Dean Witter Strategist Fund, with assets of approximately $802 million, for
an investment management fee at an annual rate of 0.60% on assets up to $500
million, scaled down at various asset levels to 0.50% on assets over $1 billion;
(30) Dean Witter Intermediate Income Securities, with assets of approximately
$248 million, for an investment management fee at an annual rate of 0.60% on
assets up to $500 million, scaled down at various asset levels to 0.30% on
assets over $1 billion; (31) Dean Witter World Wide Income Trust, with assets of
approximately $220 million, for an investment management fee at an annual rate
of 0.75% on assets up to $250 million, scaled down at various asset levels to
0.30% on assets over $1 billion; (32) Dean Witter Government Income Trust, with
assets of approximately $512 million, for an investment management fee at an
annual rate of 0.60%; (33) Dean Witter New York Municipal Money Market Trust,
with assets of approximately $43 million, for an investment management fee at an
annual rate of 0.50% on assets up to $500 million, scaled down at various asset
levels to 0.25% on assets over $3 billion; (34) Dean Witter European Growth Fund
Inc., with assets of approximately $636 million, for an investment management
fee at an annual rate of 1.0% on assets up to $500 million and 0.95% on assets
over $500 million (of which 40% is paid to a Sub-Adviser); (35) Dean Witter
Capital Growth Securities, with assets of approximately $527 million, for an
investment management fee at an annual rate of 0.65% on assets up to $500
million, scaled down at various asset levels to 0.475% on assets over $1.5
billion; (36) Dean Witter Precious Metals and Minerals Trust, with assets of
approximately $70 million, for an investment management fee at an annual rate of
0.80%; (37) Dean Witter Global Short-Term Income Fund Inc., with assets of
approximately $237 million, for an investment management fee at an annual rate
of 0.55% on assets up to $500 million and 0.50% on assets over $500 million;
(38) Dean Witter Pacific Growth Fund Inc., with assets of approximately $1.2
billion, for an investment management fee at an annual rate of 1.0% on assets up
to $1 billion and 0.95% on assets over $1 billion (of which 40% is paid to a
Sub-Adviser); (39) InterCapital Insured Municipal Bond Trust, with assets of
approximately $118 million, for an investment management fee at an annual
I-2
rate of 0.35%; (40) InterCapital Quality Municipal Investment Trust, with assets
of approximately $415 million, for an investment management fee at an annual
rate of 0.35%; (41) InterCapital Insured Municipal Trust, with assets of
approximately $534 million, for an investment management fee at an annual rate
of 0.35%; (42) InterCapital Quality Municipal Income Trust, with assets of
approximately $842 million, for an investment management fee at an annual rate
of 0.35%; (43) Dean Witter Multi-State Municipal Series Trust, with assets of
approximately $462 million, for an investment management fee at an annual rate
of 0.35% of the net assets of each Series; (44) Dean Witter Premier Income
Trust, with assets of approximately $59 million, for an investment management
fee at an annual rate of 0.50% (of which 40% is paid to a Sub-Adviser); (45)
Dean Witter Short-Term U.S. Treasury Trust, with assets of approximately $572
million, for an investment management fee at an annual rate of 0.35%; (46) Dean
Witter Diversified Income Trust, with assets of approximately $323 million, for
an investment management fee at an annual rate of 0.40%; (47) Dean Witter Health
Sciences Trust, with assets of approximately $262 million, for an investment
management fee at an annual rate of 1.0%; (48) Dean Witter Retirement Series,
with assets of approximately $29 million, for an investment management fee at an
annual rate of 1.0% of the net assets of the Global Equity Series, 0.85% of the
net assets of each of the American Value Series, the Capital Growth Series and
the Strategist Series, 0.75% of the net assets of each of the Dividend Growth
Series and the Utilities Series, 0.65% of the net assets of each of the U.S.
Government Securities Series and the Intermediate Income Securities Series, and
0.50% of the net assets of each of the Liquid Asset Series, the U.S. Government
Money Market Series and the Value-Added Market Series; (49) InterCapital Insured
Municipal Income Trust, with assets of approximately $697 million, for an
investment management fee at an annual rate of 0.35%; (50) InterCapital
California Insured Municipal Income Trust, with assets of approximately $274
million, for an investment management fee at an annual rate of 0.35%; (51) Dean
Witter Global Dividend Growth Securities, with assets of approximately $1.2
billion, for an investment management fee at an annual rate of 0.75%; (52)
InterCapital Quality Municipal Securities, with assets of approximately $454
million, for an investment management fee at an annual rate of 0.35%; (53)
InterCapital California Quality Municipal Securities, with assets of
approximately $236 million, for an investment management fee at an annual rate
of 0.35%; (54) InterCapital New York Quality Municipal Securities, with assets
of approximately $107 million, for an investment management fee at an annual
rate of 0.35%; (55) Dean Witter Limited Term Municipal Trust, with assets of
approximately $159 million, for an investment management fee at an annual rate
of 0.50%; (56) Dean Witter Short-Term Bond Fund, with assets of approximately
$43 million, for an investment management fee at an annual rate of 0.70%; (57)
InterCapital Insured Municipal Securities, with assets of approximately $143
million, for an investment management fee at an annual rate of 0.35%; (58)
InterCapital Insured California Municipal Securities, with assets of
approximately $63 million, for an investment management fee at an annual rate of
0.35%; (59) Municipal Income Trust, with assets of approximately $334 million,
for an investment advisory fee at an annual rate of 0.35% on assets up to $250
million and 0.25% on assets over $250 million; (60) Municipal Income Trust II,
with assets of approximately $291 million, for an investment advisory fee at an
annual rate of 0.40% on assets up to $250 million and 0.30% on assets over $250
million; (61) Municipal Income Trust III, with assets of approximately $64
million, for an investment advisory fee at an annual rate of 0.40% on assets up
to $250 million and 0.30% on assets over $250 million; (62) Municipal Income
Opportunities Trust, with assets of approximately $180 million, for an
investment advisory fee at an annual rate of 0.50%; (63) Municipal Income
Opportunities Trust II, with assets of approximately $177 million, for an
investment advisory fee at an annual rate of 0.50%; (64) Municipal Income
Opportunities Trust III, with assets of approximately $107 million, for an
investment advisory fee at an annual rate of 0.50%; (65) Municipal Premium
Income Trust, with assets of approximately $391 million, for an investment
advisory fee at an annual rate of 0.40%; (66) Prime Income Trust, with assets of
approximately $268 million, for an investment advisory fee at an annual rate of
0.90% on assets up to $500 million and 0.85% on assets over $500 million; and
(67) Dean Witter Global Utilities Fund, a new investment company, for an
investment manage-
I-3
ment fee at an annual rate of 0.65%. InterCapital also serves as Investment
Adviser of Dean Witter World Wide Investment Trust and Dean Witter World Wide
Investment Fund, along with Daiwa International Capital Management Corp. and
NatWest Investment Management Limited. Dean Witter World Wide Investment Trust
had assets of approximately $502 million and InterCapital receives an Investment
Adviser's fee at an annual rate of 0.55% of the Trust's daily net assets up to
$500 million and 0.5225% of the Trust's daily net assets over $500 million.
Shares of Dean Witter World Wide Investment Fund, an investment company
organized under the laws of Luxembourg, are not offered for purchase in the
United States or to American citizens outside of the United States. InterCapital
also serves as sub-adviser to Templeton Global Opportunities Trust, with assets
of approximately $441 million, for which it receives a fee of 0.25% per annum.
I-4
EXHIBIT
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of
Dean Witter InterCapital Inc.:
We have audited the accompanying balance sheet of Dean Witter InterCapital Inc.
(the "Company") (a wholly-owned subsidiary of Dean Witter, Discover & Co.) as of
December 31, 1993. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of Dean Witter InterCapital Inc. at December 31, 1993 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
February 28, 1994
A-1
DEAN WITTER INTERCAPITAL INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
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(In Thousands)
ASSETS
Cash and cash equivalents.............................................................. $ 57,810
Management and administration fees receivable.......................................... 27,010
Investments............................................................................ 7,644
Office facilities, at cost (less accumulated depreciation and amortization of
$5,122)............................................................................... 3,892
Other assets........................................................................... $ 18,176
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$ 114,532
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LIABILITIES AND
STOCKHOLDER'S EQUITY
Income taxes payable (Note 3).......................................................... $ 45,545
Dividends payable...................................................................... 12,662
Accrued compensation and employee benefits............................................. 12,337
Payable to affiliate................................................................... 4,000
Other liabilities...................................................................... 14,988
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Total liabilities.............................................................. 89,532
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Stockholder's equity:
Common stock, $.01 par value; 1,000 shares authorized and outstanding................ --
Additional paid-in capital........................................................... 10,000
Retained earnings.................................................................... 15,000
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Total stockholder's equity..................................................... 25,000
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$ 114,532
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See notes to consolidated balance sheet.
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DEAN WITTER INTERCAPITAL INC.
NOTES TO CONSOLIDATED BALANCE SHEET
1. INTRODUCTION AND BASIS OF PRESENTATION
The consolidated balance sheet includes the accounts of Dean Witter
InterCapital Inc. and its wholly-owned subsidiaries (the "Company"). The Company
is wholly-owned by Dean Witter, Discover & Co. ("DWDC"), which was formerly a
subsidiary of Sears, Roebuck and Co. ("Sears"). All material intercompany
balances and transactions with its subsidiaries have been eliminated.
On March 1, 1993, DWDC completed an initial public offering of 33.8 million
shares of its common stock at $27 per share. This transaction had the effect of
reducing Sears ownership in DWDC to 80.1 percent. On June 30, 1993, Sears
divested its remaining ownership of DWDC's common stock by means of a special
dividend to Sears shareholders.
On December 22, 1993, Dean Witter Reynolds Inc. ("DWR") transferred the net
assets of the Company in the form of a dividend to DWDC. Prior to December 22,
1993, the Company was wholly-owned by DWR, a wholly-owned subsidiary of DWDC.
The Company is a registered investment adviser under the Investment Advisers
Act of 1940. The Company sponsors and performs management and administrative
services for mutual funds, principally those sold by DWR ("DWR funds"). The
Company also performs such services for individual, institutional, trust and
estate accounts.
The Company commenced operations in January 1993 and assumed the advisory
business of DWR.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents consist of highly liquid investments not held for resale
with maturities, when purchased, of three months or less.
Fixed assets are generally depreciated utilizing accelerated methods over
useful lives of five to eight years. Leasehold improvements are amortized over
the lesser of the lease term or useful life.
3. INCOME TAXES
The Company provides deferred income taxes which result from recording
certain transactions in different years for tax and financial reporting
purposes.
Payments for income taxes are limited to those which would result from the
Company filing a separate federal income tax return.
The Company has available net operating loss carryforwards at December 31,
1993 in the amount of $112,200,000 which begin to expire in 2002.
4. RELATED PARTY TRANSACTIONS
Certain administrative services are provided by DWR which are reimbursed by
the Company.
5. EMPLOYEE BENEFIT PLANS
Substantially all employees are covered by a non-contributory defined
benefit pension plan sponsored by DWR. Pension benefits are based on length of
service and average annual compensation.
Certain employees are covered by postretirement plans sponsored by DWR that
provide medical and life insurance for retirees and eligible dependents.
Eligibility for retiree medical and life benefits is generally based on a
combination of age and years of service at retirement.
The Company reimburses DWR for pension and other postretirement benefit
expenses.
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6. LITIGATION
The Company has been named as a defendant in various lawsuits. It is the
opinion of management, after consultation with outside counsel, that the
resolution of such suits will not have a material adverse effect on the
consolidated financial condition of the Company.
7. FINANCIAL INSTRUMENTS FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is required to develop estimates
of fair value.
Substantially all financial instruments on the Company's consolidated
balance sheet are carried at fair value or at amounts which approximate fair
value.
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HIGH INCOME ADVANTAGE TRUST III
ANNUAL MEETING OF SHAREHOLDERS -- JUNE 15, 1994
PROXY
The undersigned hereby appoints ROBERT M. SCANLAN, EDMUND C. PUCKHABER,
SHELDON CURTIS, or any of them, proxies, each with the power of substitution, to
vote on behalf of the undersigned at the Annual Meeting of Shareholders of High
Income Advantage Trust III on June 15, 1994 at 9:00 a.m., New York City time,
and at any adjournment thereof, on the proposals set forth in the Notice of
Meeting dated April 21, 1994 as follows:
THIS PROXY IS SOLICITED BY THE TRUSTEES. IF NO SPECIFICATION IS MADE ON
REVERSE SIDE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR TRUSTEE AND FOR THE
PROPOSALS.
(Continued, and to be dated and signed on reverse side.)
PLEASE MARK BOXES / / OR /X/ IN BLUE OR BLACK INK.
1 ELECTION OF TRUSTEES: / / FOR ALL NOMINEES / / WITHHOLD AUTHORITY
(except as marked to the (to vote for all nominees
contrary below) listed below)
Jack F. Bennett, Michael Bozic, Charles A. Fiumefreddo, John E. Jeuck, Philip J. Purcell, John L.
Schroeder
(INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name on
the space provided below.)
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2 APPROVAL OF INVESTMENT 3 RATIFICATION OF APPOINTMENT
MANAGEMENT AGREEMENT: OF PRICE WATERHOUSE
AS INDEPENDENT ACCOUNTANTS:
/ / FOR / / AGAINST / / / / FOR / / AGAINST / /
ABSTAIN ABSTAIN
and in their discretion in the transaction of any other business
which may properly come before the meeting.
096
Please sign personally. If the
share is registered in more
than one name, each joint owner
or each fiduciary should
sign personally. Only authorized
officers should sign for
Incorporations.
Dated
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---------------------------------
Signature
---------------------------------
Signature
IMPORTANT: PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED
ENVELOPE.